Input Tax Credit of GST bill explained.

Input Tax Credit of GST bill explained.

ITC or commonly called as Input Tax Credit in GST:

In GST bill, Input credit flows in the course of action from the manufacturer till the goods is being consumed. But what is Input Tax Credit commonly referred as ITC?

When a person is buying any good or any service from a dealer then he pays taxes on it. But do you think dealer get it off taxes? No, Even a dealer pay tax to the distributor. Then what is this chain about?  When a dealer is making his sales, he is collecting tax and periodically the same tax is adjusted with the tax he paid at time of purchase and balance liability of tax (tax on sales (minus) tax on purchase) is to be paid to the government. This mechanism is called utilisation of input tax credit(tax on purchase adjustment against tax liability on output i.e. sales).

To get the benefits of ITC, you must satisfy the following conditions :

  1. The primary step for GST ITC is that you must be registered.

  2. No personal use. That is the purchases should be only for the business purposes.

  3. ITC can be claimed on taxable & zero rated supplies. Here the zero rated supplies means the Exports of the country.

  4. You can credit ITC in your Electronic credit Ledger on the common portal as prescribed in the model GST law.

  5. To claim ITC, you need supporting documents like tax invoice, debit note, supplementary invoice, etc.

  6. You can claim ITC, if you have actually received some goods & services.

  7. To claim ITC, the Input Tax must be paid through electronic cash ledger or electronic credit ledger.

  8. It is mandatory to file all the applicable GST returns under section 27.

  9. For goods which are received in lots, you can claim ITC only after you have received the final lot.

 

 

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